Return One, Keep One for Free

“Buy one, get one” offers: we’ve all seen them and, no doubt, many of us have been involved in advertising them. However, what happens with these offers when a consumer decides to return one of the products but keep the other? There are several possibilities: they might not receive any refund, or just a refund of the extra shipping and handling costs, because they’ve returned the additional, free product. They might have half their purchase price refunded on the theory that they really received half off of two items. Or, they might have their full purchase price refunded and keep the additional second item for free. A group of California consumer plaintiffs recently thought option three was the right answer.

California Civil Code Section 1723 requires that retailers must conspicuously display their refund policy if it does not meet common consumer expectations, including the expectation of a full cash or credit refund. The plaintiffs in the recently settled class action against Toys“R”Us and Babies“R”Us alleged that they purchased items that were the subject of “Buy One, Get One 50-Percent Off” promotions or that counted toward qualifying purchases for a promotion that gave consumers a $10 gift card when they purchased $75 worth of goods. The plaintiffs argued, however, that when they returned the items, they did not get a “full refund.” Instead, they allege, the stores gave them “partial refunds” to account for the 50-percent off promotion or the fact that the consumer no longer qualified for the free gift card. Because the stores had not posted a refund policy that included disclosures that consumers could not get a “full refund,” the plaintiffs argued that the defendants had violated Section 1723 and other relevant California laws.

A few weeks ago, Toys“R”Us settled the case, providing class members with a voucher for $10 off a purchase of $50 or more. Presumably, what happens if they return the products is spelled out in excruciating detail. Toys“R”Us also agreed to provide enhanced disclosure of its refund policies for merchandise purchased as part of a promotion, including placing such information at point of sale displays.

California is not the only state with a “full refund” law. Companies would be wise to take a fresh look at their refund policies and any accompanying disclosures. Legal counsel might be able to provide creative strategies that sidestep this problem, such as displaying the price for items purchased as part of a “Buy one, Get One Free” promotion on the receipt or invoice as 50-percent off for each. In that case, if a consumer returns one of the items refunding half of the total purchase price may constitute a “full refund” of the price paid for that one item.

This Toys“R”Us case is just the latest example of why, when it comes to advertising and marketing, common sense is not always a good substitute for sound legal advice.

Jeffrey D. Knowles, Amy R. Mudge and Randal M. Shaheen are partners in Venable’s Advertising Marketing and New Media Practice Group. They may be reached at (202) 344-4000.